Insurance Cos. Weather the Storm

By Grace L. Williams

Earlier today, Travelers (TRV) reported fourth quarter results, proving that although Superstorm Sandy battered the east coast, the property and casualty insurer remained intact and poised for solid upcoming quarters.

Travelers reported earnings of $304 million, or 78 cents a share, compared to $618 million, or $1.51 a share a year prior. Operating earnings came in at 72 cents a share, beating analysts’ polled by Thomson Reuters consensus of 14 cents a share.

Travelers also reported that it expects to pay around $699 million in claims from super storm Sandy.

Shares enjoyed a positive day, rising 2.2% in session.

Perhaps the biggest news from Travelers’ earnings was what it said about the rest of the sector; Sterne, Agee & Leach analyst John Nadel weighed in somewhat bullishly on the macro level.

We note Travelers also reported continued solid renewal pricing, in particular in Business Insurance with 6%-10% rate increase “led by Workers Compensation and Commercial Auto” as well as double-digit rate increases in Personal Insurance. Further, management estimates rate gains across all of its lines are now exceeding estimated loss trends, which should help generate underwriting margin improvement over time. We expect a combination of the more benign non-catastrophic weather, solid renewal rate increases, and potentially the exposure growth experienced by Travelers, and should aide results for American International Group (AIG), Assurant (AIZ) (non-catastrophic weather only), Hartford Financial Services (HIG) and MetLife (MET).

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